Wishing all the readers of AIFTP Journal Very Happy & Prosperous New Year
Furthering the trajectory the Government on the occasion of birth anniversary of Shri Deendayal Updhyay the leader of political party ‘Bhartiya Jan Sangh’ a forerunner to ‘Bhartiya Janta Party’, firmly placed a foot towards ‘Faceless Appeals’. Accordingly the Faceless Appeals as touted in the past has been finally brought into effect from 25/09/2020 as per the CBDT Press Release dated 25/09/2020. As can be gleaned from the press release, the motive is to reduce the hardships to the appellant by facilitating the taxpayers to file their submission from the comfort of their home and shall further save the time and resources of the appellant. The scheme also seems to reduce the time span in disposal of appeals and reduce the burden of pending cases, just to quantify 4.6 lakh cases are pending before the CIT(A). Ex-facie the year 2020 in the tax prospects seems to adopt the 20-20 cricket format for faster disposal of cases through online proceedings.
Under the Faceless Appeals Scheme just like the Faceless Assessments the physical interface between the appellant and the Department has been dispensed off. Moreover even the National e-Assessment Scheme or the Assessing Officer cannot directly communicate with the appellate unit. Therefore the complete process right from allocation of appeals, communication of notice/questionnaire, verification/enquiry to hearing and communication of appeal order shall be online.
Further the operandi of the faceless appeals has been determined to include allocation of cases through Data analytics and AI under dynamic jurisdiction with central issuance of notice bearing DIN. As part of dynamic jurisdiction the draft appellate order shall be prepared in one city and reviewed in another. This assures quality appellate order by subjugating it to a review before the final appellate order is passed.
The shift towards Faceless Appeals was introduced vide amendment to section 250 by introducing sub-clause 6B & 6C to section 250 of Income Tax Act 1961. The said section is reproduced herewith to understand the framework for advancement towards the Faceless Appeals :-
[(6B) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of disposal of appeal by Commissioner (Appeals), so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Commissioner (Appeals) and the appellant in the course of appellate proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals).
(6C) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (6B), by notification in the Official Gazette, direct that any of the provisions of this Act relating to jurisdiction and procedure for disposal of appeals by Commissioner (Appeals) shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2022.
(6D) Every notification issued under sub-section (6B) and sub-section (6C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.]
On perusal of the aforementioned amendment it is palpable that sub-section 6B & 6C enable the Government to introduce Faceless Appeals vide a Notification in the Official Gazette. However such Notification shall be subject to the approval in each of House of Parliament. Deriving powers from the said provision of Income Tax Act 1961 the Government on 25/09/2020 vide Notification No. 76/2020 introduced the Faceless Appeals Scheme, 2020 with immediate effect.
CBDT vide Notification No. 77/2020 dated 25.09.2020 issued directions for the purpose of giving effect to the Faceless Appeal Scheme, 2020 notified vide Notification No. 76/2020 dated 25.09.2020 under the Income Tax Act, 1961 (“Act”).
As per the directions, the National Faceless Appeal Centre (NFAC) shall assign the appeal to a specific appeal unit in any one of the Regional Faceless Appeal Centre (RFAC) through an automated allocation system.
The Appeal Unit shall decide on the condonation in filing the appeal by the appellant and shall communicate its decision to NFAC. The NFAC shall intimate the admission or rejection of appeal to the appellant.
On admitted appeal, the appeal unit shall request the NFAC to obtain any further information or document or evidence from the appellant or any other person. The appeal unit is authorized to obtain a report from the NeAC or the assessing Officer on the grounds of appeal or information, documents or evidence filed by the appellant.
Any notice on the matter of appeal shall be served by the NFAC to the appellant or any other person or NeAC or Assessing Officer as may be specified by the appeal unit.
The appellant or any other person shall file his response to the NFAC only within the prescribed time limit or extended time limit. Similarly, any report shall be filed by the NeAC or assessing Officer to the NFAC.
Appellant is allowed to file additional grounds with reasons. National Faceless Appeal Centre shall send the additional ground of appeal to the National e-Assessment Centre or the Assessing Officer, as the case may be, for providing comments, if any, and to the appeal unit. National Faceless Appeal Centre shall intimate the admission or rejection of the additional ground, as the case may be, to the appellant.
The appellant may file additional evidence in such form, as may be specified by the National Faceless Appeal Centre.
Finally, the appeal unit shall prepare a draft order in accordance with the provisions of section 251 of the Act and send the order to the National Faceless Appeal Centre along with the details of the penalty proceedings, if any, to be initiated therein.
National Faceless Appeal Centre shall upon receipt of the draft order finalise the appeal as per the draft order or send the draft order to an appeal unit, other than the unit which prepared such order, in any one Regional Faceless Appeal Centre through an automated allocation system, for conducting a review of such order.
The appeal unit shall review the draft order, referred to it by the National Faceless Appeal Centre, whereupon it may decide to,–
(a) concur with the draft order and intimate the National Faceless Appeal Centre about such concurrence; or
(b) suggest such variation, as it may deem fit, to the draft order and send its suggestions to the National Faceless Appeal Centre.
The National Faceless Appeal Centre shall, upon receiving the concurrence of the appeal unit, finalize the appeal as per the draft order. In case of variance is suggested, the same will once again be given to another appeal unit to review the draft order.
National Faceless Appeal Centre shall, after finalizing the appeal, pass the appeal order and shall communicate such order to the appellant PCCIT/CCIT/PCIT/CIT, to the NeAC or AO.
A person shall not be required to appear either personally or through authorized representative in connection with any proceedings under the said Scheme before the income-tax authority at the National Faceless Appeal Centre or Regional Faceless Appeal Centre or appeal unit set up under the said Scheme. Though provisions for personal hearing is included in the directions, but such personal hearing will take place through video conferencing only.
An appeal against an order passed by the National Faceless Appeal Centre under the said Scheme shall lie before the Income Tax Appellate Tribunal having jurisdiction over the jurisdictional Assessing Officer.
Points for clarification
While the Faceless Scheme is an inexorable march towards transparency through digital means, it may face some teething troubles, unless necessary clarifications are issued in a timely manner.
At the outset the constitutional validity of introducing such a scheme vide notification in an official gazette is under question and we will have to wait till the same is considered by the Judicial authorities.
The insertion of enabling provisions in the Taxation Bill has removed ambiguity regarding the coverage of the scheme to a certain extent. It has been explained that matters pertaining to search, seizure and international tax charges shall be kept outside the purview of the scheme. However, the department shall still have to clarify matters such as circumstances under which the assessee shall be eligible for personal hearing through video conferencing, whether the hearing would be recorded and if yes, whether it would be made available to the assessee for future reference.
Further, while it has been made clear that proceedings under DRP shall be conducted in a faceless manner, it is still being deliberated upon as to how the DRP would exercise its power of making further enquiry. Further, it is doubtful as to how tax clearance certificates (under Section 281) will be issued and whether it would form a part of the section governing faceless approval and registration process.
Another grey area is while the law lays down the recommendation of initiation of penalty proceedings by any unit, it does not pronounce a procedure for the conduct of proceedings. The question arises that while almost all proceedings have gone the digital way, why have penalty proceedings been kept out.
While we await clarity on dubious issues, both the taxpayer as well as the department must brace themselves and make sincere efforts for successful implementation of the scheme. Taxpayers should now maintain robust documentation in relation to potential and legacy issues, prepare self-explanatory and concise written submissions, update their contact information on the e-filing portal and respond to the notices timely. Likewise, the department must adopt a non-adversarial approach, grant reasonable time for response, issue clarifications wherever necessary and give time to adjust to the new mechanism.
H. N. Motiwalla,